Most of the fears about emerging economies focus on jobs being lost to low-cost foreign competitors. But the real threat is to wages, not jobs. In the long run, trade and offshoring should have little effect on total employment in rich countries; rather, they will change its composition. So long as labour markets are flexible, job losses in manufacturing should eventually be offset by new jobs elsewhere. But trade with emerging economies can have a big impact on both average and relative wages.
There is an interesting piece in Today's Roll Call, about the new push by Democrats on economic issues. It quotes a GOP spokesperson, showing off their new economic attack line. “Wait, is the economy yet another ‘new direction’ for the Democrat leadership?” says one GOP staffer quoted in the piece. “Good luck. Gas prices are down, jobs and wages are up and security is still the top concern.” For the final time, especially for those who haven't been listening at the back, real wages have not risen. And here is the Economist to prove it:
Over long periods of time, real wages tend to track average productivity growth. But so far this decade, workers' real pay in many developed economies has increased more slowly than labour productivity. The real weekly wage of a typical American worker in the middle of the income distribution has fallen by 4% since the start of the recovery in 2001. Over the same period labour productivity has risen by 15%. Even after allowing for health and pension benefits, total compensation has risen by only 1.5% in real terms. Real wages in Germany and Japan have also been flat or falling. Thus the usual argument in favour of globalisation—that it will make most workers better off, with only a few low-skilled ones losing out—has not so far been borne out by the facts. Most workers are being squeezed.
The GOP approach to the economy this cycle looks clear. They are running a twin track strategy: (1) tax-raising accusation and (2) outright disembling on incomes and wages. But how can they get if even the Economist and the FT aren't prepared to give them a pass?
This was supposed to be the week they turned it around. A new White House offensive on terrorism, the nutty ABC movie, a primetime speech by Bush, a come from behind win in Rhode Island. Stories early in the week all pointed to a resurgent GOP, ready to turn around their bad poll numbers and use their political mastery to whack the Dems, again.
Didn't really play out that way, did it?
Pentagon lawyers publically rejected the Adminstration's proposal for new military tribunals. House Republicans rejected the Bush/McCain-led Senate-passed immigration bill, relabeling it the "Reid-Kennedy Democratic Amnesty" Bill. Senate Republicans and Secretary Powell choose the Geneva Conventions over Bush's detention and interrogation plan. Iraq had some of the most violent days in its recent history. The sordid scandals of the Bush era returned with a vengence, as a 2nd Republican Congressman, Bob Ney, pled guilty to corruption charges. He is now set to return to court October 13, just a few weeks before the election.
The week began with the story line R's resurgent. It ended with Rs in deep and difficult disarray.
One other sign of how desperate the Administration is to change the story line of this election is their effort to lie about current economic circumstances. As James Crabtree reported earlier this week on our blog, the Chairman of the Council of Economic Advisors gave a speech this week repeating the Administration's case that contrary to all public analyses wages and income are rising in the United States. He based his argument on what is called nominal wages, or the actual rise of wages prior to adjusting for inflation. Of course these figures have risen, but once inflation is accounted for peoples incomes and wages have declined in recent years. All public analyses use these figures, or real wages and income as their measure. It is extraordinary for an economist to be making this case, as he is surely aware of the ridicule that will be heaped upon him by his peers. And to us, here at NDN, this effort to recast the economic debate needs to be understood simply as an incredible and purposeful lie by the Administration, something I guess we've all become used to in recent years.
The scandal around Congressman Bob Ney (R-OH) appears to be coming to a head today. The NYT reports that he is pleading guilty to charges stemming from his involvement with disgraced lobbyist Jack Abramoff:
The guilty plea, scheduled to be formalized in Federal Court here on Oct. 13, will make Mr. Ney, a six-term congressman, the first member of Congress to admit to criminal charges in the Abramoff investigation, which has focused on the actions of several current and former Republican lawmakers who had been close to the former lobbyist. The government will recommend that he serve 27 months in prison.
Charges related to the Abramoff scandal have been a long time coming, and are indicative of the culture of corruption that plagues Republicans in Congress. If this Republican Congress is a rotten apple, than Ney, who until recently was a rising star in the party, was the stem clinging to the tree. With the investigation of him finished, look for investigators to move onto the rest of the apple.
Recently, Democrats have been focusing more on the failures of Republican governance, and less on the pervasive influence-peddling that has been a hallmark of Republican leadership since they took over the House in 1994. It'll be interesting to see if this news leads to more talk about corruption from Democrats.
Moving from current scandals to potential future ones, students at Princeton University have shown that it is possible to hack into Diebold touch screen voting machines and change vote counts, without leaving behind any evidence of tampering. Make sure to watch the video demonstrating the ease with which these students tampered with Diebold software. The machine they tested on uses the same software as the 130,000 Diebold voting machines in use across America. This discovery may lead to more states choosing alternative, traceable voting technology. This isn't the first scandal involving Ohio-based Diebold. You may remember Diebold CEO Walden O'Dell saying he was "committed to helping Ohio deliver its electoral votes to the president next year " even as his company was selling election equipment to Ohio.
As Paul Krugman writes this morning, whether or not the "typical American family better off than it was a generation ago" has become the subject "of an intense debate these days, as commentators try to understand the sour mood of the American public." Its been a fascinating debate to watch unfold over the last month or two, much of it happening online (and being summed up publically in Krugman's collumns) . The catalyst was the updating of a landmark academic study during the summer, complete with stark new figures on income concentration. This debate is particularily germaine here in America because the same trends simply don't show up in lots of other countries. Simply put: the French trade more than the US, have more mobile phones, use the internet just as much, and have plenty of immigration. But their society has got no more unequal over the last 20 years.
Krugman references an ongoing debate about the middle class, a pretty clear not to this ongoing scrap at The American Prospect, in which Steven Rose of 3rd Way and Larry Mishel of EPI go statistical toe to statistical toe over the fullness of America's middle class glass. The gist of the debate is this. We know incomes and wages haven't risen much since the mid 1970s, with the exception of the late 1990s, with the last few years especially bad. On the way we gained iPods and the internet, which is nice. But our parents took all the good beach front property, and our commute got longer. Are we better off? Krugman says this is "the wrong debate" - instead we should be trying to find out why all the iPod and internet goodness (meaning productivity and technological advancement) hasn't made us even better off. This is an odd argument, on the face of it. The question of whether we actually are better off would seem to me prior to whether we ought to be better off than we are. Nonetheless, the argument is well put:
The United States economy is far richer and more productive than it was a generation ago.... In 1973, there were no personal computers, let alone the Internet. Even fax machines were rare, expensive items, and there were no bar-code scanners at checkout counters.....Yet in spite of all this technological progress, which has allowed the average American worker to produce much more, we're not sure whether there was any rise in the typical worker's pay.
That's why the debate over whether the middle class is a bit better off or a bit worse off now than a generation ago misses the point. What we should be debating is why technological and economic progress has done so little for most Americans, and what changes in government policies would spread the benefits of progress more widely.
This is a critical time for those of us who believe in open markets and trade liberalization.
The current global trade negotiations, the Doha Round, have collapsed. In the wake of five years of accelerating globalization, during which American wages have stalled and job creation has slowed, the national consensus to continue to liberalize trade –one that has helped America and the world prosper for more than fifty years -- is under threat.
Today Rob Shapiro and I are releasing a detailed new memo – Rebuilding the National Consensus on Trade - outlining why Democrats and Republicans must act now to reverse President Bush’s failed leadership on trade liberalization.
You can read the memo online here, or download a PDF version here.
In the memo we examine why poor Republican leadership and greater economic anxiety explain Doha’s collapse. We also outline 6 specific areas where progressives can fight back this fall, and lay out the beginnings of a strategy to help rebuild our national consensus on liberalization in the future.
Simon is in The Hill today discussing the importance of meaningful immigration reform and the need for Democrats to include it in their new agenda.
Simon Rosenberg, president of the New Democrat Network, a political advocacy organization that has spent millions on drawing Hispanic voters into the Democratic Party fold, defended the Democratic record on immigration. Still, he chided leaders for their omission....“Given how much energy and time Democrats have put into trying to pass comprehensive immigration reform, it’s unfortunate that immigration hasn’t made it into the document, because the party has made it a priority,” said Rosenberg......Rosenberg urged Democrats not to run away from the issue of immigration, vowing that it’s a debate they will win over Republicans, many of whom are focusing exclusively on a tough law-and-order approach to illegal immigration....Rosenberg predicted that some Democrats would spend a lot of money highlighting immigration this fall....“We’re going to see a lot of back-and-forth in paid media on immigration,” he said. “We have nothing to fear. We have a plan to solve the problem and [the Republicans] don’t.”
Any lingering questions about Republican campaign strategy in the final fifty days are being answered. Those of you hoping for a substantive debate on the challenges facing our nation shouldn't hold your breath. Facing the loss of control of one or even both houses of Congress, Republicans are planning on utilizing what Bill Clinton called the "personal politics of destruction" against their opponents. The Washington Postreports that:
Republicans are planning to spend the vast majority of their sizable financial war chest over the final 60 days of the campaign attacking Democratic House and Senate candidates over personal issues and local controversies, GOP officials said.
There is no time to lament the death of civility in political debate, because the strategy is already underway. Yesterday, House Majority Leader John Boehner said that Democrats are "more interested in protecting terrorists than in protecting the American people." And this strategy of making outlandish attacks is being parroted by Republicans across the country, from Rick Santorum to the President in his "non-political speech" Monday night.
How effectively Democrats deflect these attacks and keep the focus on Republican failures of governance will determine who wins in November, and could also send a message that the era of Rovian character assassination politics is over.
There is a sense in which you know something is on the agenda only when the other side begins to fight back. So Edward Lazear's remarks yesterday are just a further example of the administration's coming-to-terms with its poor ratings for economic handling. There has clearly been a concerted push on national security since the Vice-President's Sunday interview. But, spurred on by a certain cheeryness about the fall off in pump prices, there seems to be an ongoing campaign to talk up the economy also. The FT piece - written by Edward Luce, who also wrote the first front page story on the subject a month ago - gives a good account.
Mr Lazear on Tuesday pointed to a 4.1 per cent increase in nominal workers' compensation in the first six months of this year as evidence that employee remuneration was starting to catch up with productivity growth, which has achieved an average annual 3 per cent increase since the US economic recovery began five years ago.
However, critics of the Bush administration say that real wage growth, which excludes the inflationary cost of healthcare that has fuelled compensation growth, continues to languish at or below annual inflation...... met with growing scepticism among economists who point out that real wages for most Americans are marginally below where they were four years ago, in spite of strong overall growth in gross domestic product. According to the Bureau of Labour Statistics, the average hourly wage for private sector non-farm workers was $8.17 in August 2006 (at 1982 prices) compared with $8.23 in August 2002.
8.17 plays 8.23. Its like split times in the 60 yards dash. Woosh! Wages are rising so fast they are just a hair's breadth from zooming passed where they were four years ago. I think this cartoon in the Post a few days back put it best.
Tony Blair is a dead politician walking after the palace coup staged against him last week. Still, given the furore over the President's not-quite-what-you'd-call-non-partisan remarks of a few days ago, i'm still impressed by the ability of the British PM to properly describe world events. This is from a speech he gave yesterday:
Globalisation is so often debated today that it can just elicit a yawn. 'The world is interdependent' has become a cliche. What isn't cliched, however, is the response to it. For the first time, I can sense building up, here and round the world, a division, not of ideology but of attitude, as to how we deal with the consequences of globalisation. Ten years ago, the response was reasonably clear and adopted by consensus.Yes, globalisation was at one level frightening, in its pace and reach; but the only rational response was to manage it, prepare for it and roll with it.
I don't think there is that consensus today. There is a mindset of fear that is different and deep. People see the burgeoning economic power of China, India and the emerging economies threatening jobs and stability.....What has changed is the interplay between globalisation, immigration and terrorism. Suddenly we feel under threat: physically from this new terrorism that is coming on to our streets; culturally as new waves of migrants change our society; and economically because an open world economy is hastening the sharpness of competition.
A stretch to think he might have managed the world "interplay", but imagine if President Bush had said something like that instead. But he won't. Perhaps the best option would be a Blair-for-Connecticut write-in campaign after all.